Vietnam emerges as a dynamic center for Fintech innovation in the Asia-Pacific, offering fertile ground for pioneering technologies and transformative financial solutions. With rapid growth fueled by digitization initiatives and a tech-savvy populace, Vietnam presents an expansive market ripe for exploration by visionary Fintech firms. In this article, we uncover the captivating developments propelling Vietnam to the forefront of the Fintech revolution in the region.
Vietnam - Fintech Launchpad in Asia-Pacific
Amidst the dynamic landscape of Asia-Pacific’s fintech arena, Vietnam emerges as a vibrant hub of innovation and growth. Vietnam’s fintech narrative gains momentum as it positions itself as the second-largest player in the ASEAN fintech landscape, projected to reach a remarkable US$18 billion by 2024. This surge reflects ongoing innovations reshaping financial services and driving sustainable economic progress.
While Singapore leads Southeast Asia in the total count of operational fintech firms (1580 firms by 3rd quarter of 2022), Vietnam’s fintech landscape offers substantial growth prospects. The burgeoning size and user base of the nation’s fintech companies highlight the market’s immense potential (Vietnam Acclime, 2023). As per UOB, the number of fintech enterprises has quadrupled over the past few years, from 39 companies at the end of 2015 to more than 200 firms in 2022, showcasing rapid growth and evolution in the sector. (United Overseas Bank, 2022)
Projections paint an exciting picture: the Vietnam fintech market is on the brink of substantial expansion, with transaction values expected to skyrocket from USD 39.02 billion in 2024 to an impressive USD 72.24 billion by 2029, showcasing a remarkable CAGR of 13.11% during the forecast period. (Mordor Intelligence , 2023)
Mr. Huynh Cong Thang, Co-founder and CEO of InnoLab Asia, expressed his perspective with captivating insight: “With smartphone penetration exceeding 95% and Vietnam’s rapid embrace of digital payments in Southeast Asia, I firmly believe Vietnam presents an ideal launchpad for fintech companies in the region.”
In addition, with a tech-savvy middle-class population of 77.9 million as of January 2023, Vietnam presents an opportunity for consumer finance institutions to collaborate with the fintech industry. Understanding the diverse needs and preferences of customer groups can drive the development of technology-driven business models in this sector. (Statista, 2022)
A report from YCP Solidiance also underscores Vietnam’s status, along with Indonesia and the Philippines, as having one of the largest underbanked or unbanked populations (54%) in Southeast Asia. This highlights the urgent need for enhanced financial inclusion and the exploration of new markets and customer segments. Combined with increasing mobile phone connectivity (150%), internet penetration (70%), and 3G & 4G registrations (45%), Vietnam remains largely an untapped market and a promised land for fintech investors. YCP Solidiance, 2023)
The country’s government’s initiatives further propel Vietnam’s fintech journey. The authorization of a pivotal project aimed at advancing cashless payments from 2021 to 2025, along with the recent approval of Vietnam’s National Digital Transformation Program until 2025, signals favorable conditions for fintech investors seeking to capitalize on the country’s burgeoning opportunities.
Mr. Anirban Roy, Senior Partner of InnoLab Asia and former Vice President of OCB Bank, also shares his views on Vietnam’s fintech potential: “The future of Fintech in Vietnam is very promising, particularly within the MSME segment. With the Government’s strong push towards digitalization of MSMEs, there’s a substantial opportunity for Fintech to flourish by aligning with this wave of innovation. By forging partnerships with modern lightweight ERP providers and leveraging cashless platforms like VietQR, the Fintech industry can offer comprehensive financial solutions tailored to the unique needs of MSMEs. Leveraging data derived from their day-to-day business operations, Fintech can provide insightful and impactful financial services that drive growth and efficiency for MSMEs in Vietnam. This collaboration between Technology and Finance holds the key to unlocking tremendous potential and driving sustainable economic development of MSME segment in particular and the country in general.”
Vietnam’s fintech market is poised for significant growth, driven by favorable regulatory environments, government support, and a burgeoning ecosystem of innovative startups. Positioned as one of the most promising markets in the region, Vietnam presents abundant opportunities for fintech investors to thrive and innovate, thereby shaping the future of financial services in the country and beyond.
Key sectors & Case studies
The Vietnamese fintech landscape is a vibrant tapestry of innovation, with various sectors and focal points driving its dynamic evolution.
In recent years, financial technology has transformed a wide range of financial services, rapidly adopting and attracting hundreds of billions of dollars in global investment.
It’s evident that the fintech sector has seen significant capital investment, with Core Payment taking the largest share (at $889 million from the period 2019-2022) (NIC , 2023). Additionally, emerging sectors garnering attention and showing promise include Data Analytics, Wealth Management & Capital Markets, Lending Business, Banking as a Service, and Insurance.
Below are some exemplary fintech startup case studies across various sectors in Vietnam:
Digital Payments – 40 e-wallets operating companies in Vietnam with 90% market share held by Momo (PwC, 2021). One prominent case study in the digital payments sector in Vietnam is MoMo. MoMo is a leading mobile wallet application that has revolutionized the way people in Vietnam conduct financial transactions. The Startup operates as a mobile payment platform that allows users to perform a wide range of financial activities, including money transfers, bill payments, online shopping, and more, all through their mobile devices.
The Digital Banking – notable case study in the digital banking sector in Vietnam is CAKE. Launched in 2021 as a collaboration between ride-hailing firm Be Group and Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), CAKE has quickly gained more than 1.5 million customers in just over a year. The mobile app offers a suite of banking services, including account management, payments, transfers, savings, investments, and more, all accessible through a mobile app. (VCCI, 2022)
Peer-to-Peer Lending (P2P) emerges as a promising avenue for alternative finance. Platforms like GIMO that specializes in providing flexible salary payment solutions. In 2023, the startup announced the completion of its Series A funding round, raising a total of $17.1 million USD. (GIMO, 2023)
Wealth Management is a $600-billion worth market in Vietnam by 2027, experiencing significant growth and innovation as digital solutions reshape how individuals manage and grow their assets (Mc Kinsey, 2023). Finhay as an example, a local fintech startup, specializes in micro-investment solutions, enabling users to invest small amounts in diverse financial products like mutual funds and government bonds. The startup is a pioneering asset management platform aimed at empowering millennial investors to delve into micro-investments in mutual funds. In its latest funding round, this startup raised 25 million USD in Series B funding, led by Openspace Ventures and Vietnam Investments Group. (Tech in Asia , 2022)
Insurtech – Vietnam’s Insurtech grows nearly 50% each year, the same speed as Indonesia and the Philippines (Google and Bain Report, 2022). By providing digital products, personalized coverage, and efficient claims processing, they are revolutionizing the way insurance is perceived and accessed in Vietnam. Global Care is an example who facilitates seamless transactions for insurance agencies, streamlining sales and administrative processes. This enables convenient transactions for customers seeking non-life insurance products, addressing not only purchasing needs and claims processing but also providing direct access to customer service representatives. (VOV, 2021)
Buy Now Pay Later (BNPL) is increasingly popular and widely utilized. According to data from Research & Markets, the BNPL market in Vietnam is expected to grow by 45.2% annually, from $496.4 million in 2021 to $10,528.1 million in 2028 (Statista, 2023). Fundiin is a key example in Vietnam’s BNPL industry, known for its innovative approach to consumer finance. The company focuses on providing accessible and transparent payment solutions that empower customers to make purchases without immediate financial strain. The startup offers three interest-free and fee-free BNPL products, including: Pay in 3 monthly installments; Pay after 30 days; Automatic recurring payments. In 2022, this startup achieved a significant milestone by successfully raising a $5 million investment in its Series A round. (ThinkZone Ventures, 2022)
In essence, these key sectors and areas underscore the vast potential and opportunities within Vietnam’s fintech sphere. They epitomize the spirit of innovation, collaboration, and growth that defines the landscape, promising a future brimming with possibilities in the ever-evolving world of financial technology.
Legal and regulatory considerations
Innovation collides with regulatory intricacies. Understanding the legal and regulatory dynamics becomes paramount for stakeholders aiming to harness the full potential of this vibrant market. The evolving regulatory framework, while striving to keep pace with rapid fintech advancements, can create uncertainties for companies, necessitating adaptable compliance strategies.
- Acquiring licenses for fintech services involves intricate procedures and rigorous standards, posing significant challenges for startups.
- Compliance with data privacy regulations and robust cybersecurity measures is imperative, demanding substantial investments in technology and expertise.
- Fintech ventures must also adhere to stringent anti-money laundering regulations, requiring effective measures and thorough customer due diligence.
- Regulatory ambiguity, particularly in areas like peer-to-peer lending and blockchain, can impede innovation and investment, emphasizing the need for clear guidelines.
- Operating internationally adds complexity, with diverse regulatory frameworks across jurisdictions requiring proactive engagement with authorities. Building positive relationships with regulatory bodies and proactive collaboration are vital, as non-compliance can lead to severe penalties or suspension of operations.
In recent years, Vietnamese banks have increasingly recognized the potential of open banking, unveiling developer portals and offering open APIs for third-party use. Despite these advancements, the absence of a comprehensive regulatory framework hampers their ability to fully embrace open banking.
In a June 2022 article of Bao Dau Tu, Mr. Roy Anirban (Senior Partner of InnoLab Asia & Former Vice President of OCB Bank) emphasized the necessity for the State Bank of Vietnam (SBV) in establishing rules and standards to ensure interoperability, security, and consumer data privacy in open banking.
“When there is no common standard for open banking, different banks will implement different API security protocols, leading to the possibility of data theft from some open banking participants,”
He further explained “[In addition,] non-bank ecosystem partners will have to connect using different API formats from bank to bank, which will affect the quality of the system software, introduce risk for poor customer experience as different banks will provide different information” (Fintech Singapore, 2022)
He highlighted that SBV should adopt an Account Aggregator (AA) model akin to India’s. Introduced by the Reserve Bank of India (RBI), the AA network facilitates financial data sharing among institutions with the individual’s consent. Various entities, such as banks, NBFCs, asset management firms, and insurance companies, can join as Financial Information Providers (FIPs) or Financial Information Users (FIUs). In India, over 1.1 billion bank accounts can share data via AA, with approximately 1.4 million users linking and sharing data. Furthermore, numerous SEBI, insurance, and pension regulated entities are active on AA, with 72 entities accessing data as FIPs and FIUs. (Ministry of Finance in India, 2022)
Thus, understanding and mitigating regulatory risks are essential for fintech ventures to maintain business continuity and uphold their reputation in the market.
Despite being in the process of refining its legal and regulatory framework for the fintech and financial sector, the Vietnamese government continues to exert relentless efforts in crafting policies tailored to the needs of financial companies such as:
Cashless Payment:
- Prime Minister Decision 2545/QD-TTg approving the Scheme on development of cashless payment in Vietnam during 2016-20.
- Decision 316, issued in March 2021, permitting the use of mobile money for small transactions.
E-money and E-Transactions:
- The 2005 Law on Electronic Transactions, Decree 35/2007/ND-CP on electronic transactions in the banking sector, Decree 101/2012/ND-CP on cashless payment (revised under Decree 80 of 2016), and SBV Circular 39/2014/TT-NHNN guiding intermediary payment services.
- Decision No. 194/QD-TTg issuing the National Action Plan to implement the commitments of the Vietnamese Government on anti-money laundering, counter-terrorism financing, and the proliferation of weapons of mass destruction, aiming to remove Vietnam from the Grey List of FATF Specialized Financial Intelligence Unit on Anti-Money Laundering.
Controlled Testing Mechanisms for Fintech Activities:
- Government Resolution No. 100/NQ-CP approving the proposal to draft a decree on Controlled Testing Mechanisms for Fintech activities in the banking sector including Credit Scoring, Data Sharing via Open API, and Peer-to-peer lending (P2P Lending).
- Decision 999/QD-TTg authorizing the State Bank of Vietnam (SBV) to draft a decree on Fintech regulatory sandbox, allowing entities to test innovative financial products or services.
Looking ahead, an early issuance of a comprehensive legal framework for fintech in Vietnam will be instrumental in attracting investment and fostering growth in the industry. As the fintech landscape continues to evolve, startups must remain agile and proactive in addressing regulatory challenges to seize opportunities for innovation and expansion.
Emerging Vietnam’s Fintech Trends for 2024
Green Fintech and Sustainable Finance
According to Tech.eu, the ESG Fintech space has seen a robust increase in capital funding on a global scale over the last three years, reaching around US$ 4.0 billion in 2022, up 2x CAGR for 2020-2022 (Tech EU, 2023). This indicates that global investors are beginning to recognize the important role that Fintech can play in addressing ESG challenges. These green fintech initiatives are gaining momentum, offering innovative financial products that prioritize sustainability. From eco-friendly investment opportunities to the integration of ESG criteria into decision-making processes, the fintech industry is paving the way for a more sustainable future.
Financial inclusion is key for growth
With over 77% of adults in Vietnam now holding bank accounts and a steady 20–25% annual increase in non-cash transactions, fostering financial inclusion is paramount (VietnamPlus, 2024). The government’s initiatives to promote mobile money and enhance services for underserved communities underscore this commitment. In 2020, the Prime Minister’s approval of the Vietnam national strategy for financial inclusion until 2025 signals a concerted effort to enable widespread access to financial services.
Digital Identity and Biometric Authentication
The Mastercard Payments Index 2022 reveals that most Vietnamese consumers (over 75%) prefer biometric authentication for both identity verification and payments, surpassing traditional methods (VCCI News, 2022). The Data Protection Decree 13, introduced in early 2023, bolsters consumer data and privacy rights. Biometric solutions, aligned with this legal framework, offer compliant and efficient options for businesses. Rapid advancements in digital identity solutions emphasize biometric authentication’s role in enhancing security and convenience. These measures are vital for fraud prevention and building user confidence. Additionally, blockchain technology ensures the integrity and security of digital identities through decentralized management systems.
AI-Powered Personalization:
In response to the growing demand for tailored services, recent studies reveal that 66% of customers seek personalized solutions (Salesforce, 2022). Harnessing the capabilities of artificial intelligence (AI), fintech companies now have the ability to meet these expectations. AI-driven chatbots, virtual assistants, and robo-advisors offer automated support and personalized advice, elevating customer engagement and fostering loyalty. By leveraging AI insights, fintech firms can continuously evolve to address the dynamic needs of their users. For example, Sacombank Vietnam’s collaboration with Temenos since 2004 has yielded significant technological advancements, notably with the implementation of Data Lifecycle Administration for the Temenos T24 basic banking system. This initiative showcased rapid cost savings, centralized knowledge management, and real-time data processing. Headquartered in Geneva, Switzerland, Temenos AG (SWX: TEMN) is a global leader in providing cutting-edge software solutions for banks and financial institutions. (Temenos, 2023)
By embracing these emerging trends and leveraging innovative technologies, fintech companies in Vietnam are well-positioned to capitalize on opportunities, address evolving customer demands, and drive growth in the dynamic and competitive fintech landscape of 2024.
In conclusion
In embracing emerging trends and leveraging innovative technologies, Vietnam’s fintech sector stands poised as a frontrunner in shaping the future of finance across the region. With a dynamic ecosystem and proactive regulatory measures, Vietnam offers fertile ground for fintech innovation and growth. As the industry continues to evolve, driven by advancements in digitalization and consumer preferences, Vietnam’s fintech firms are well-positioned to lead the charge towards a more inclusive, efficient, and tech-driven financial landscape. With collaborative efforts and strategic initiatives, Vietnam’s fintech sector is set to redefine the norms of finance, heralding a new era of financial innovation and accessibility in the Asia-Pacific region.
As we delve deeper into the world of fintech, follow us on our journey to uncover more fascinating case studies that showcase the transformative power of innovation in Vietnam’s financial landscape. Stay tuned for insights into the next wave of groundbreaking initiatives and insights from the evolution of finance in Vietnam!
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